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A project that costs $22,000 today will generate cash flows of $8,100 per year for seven years. What is the project's payback period? Multiple Choice 2.26 years 3.00 years 2.72 years .37 years 2.17 years

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Answer:

It will take 2.72 years to cover the initial investment.

Explanation:

The payback period is the time required to cover the initial investment:

Year 1= 8,100 - 22,000= -13,900

Year 2= 8,100 - 13,900= -5,800

Year 3= 8,100 - 5,800= 2,300

To be more accurate:

(5,800/8,100)= 0.28

It will take 2.72 years to cover the initial investment.

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